Seoul Housing Market Defies Cooling Measures, Prices Rise Ahead of BOK Policy Decision

Seoul apartment prices climbed 0.2% in the week through Nov. 17, reversing from three weeks of moderation and signaling a resilient housing market ahead of the Bank of Korea's (BOK) policy meeting. The 0.2% increase, compared to a 0.17% gain the previous week, reflects continued demand for housing in the capital, with year-to-date gains reaching 7.5% according to Bloomberg. Analysts say the uptick strengthens the case for the BOK to hold interest rates steady at its Nov. 27 meeting.

The latest price rise is attributed to redevelopment of old properties and growing buyer interest in improved living conditions and apartment facilities. Despite government measures to cool the market, Seoul's property prices remain on an upward trajectory, extending the rally to a 42nd consecutive week according to Bloomberg. The Korea Real Estate Board noted that buyer inquiries have declined, but a wait-and-see approach remains widespread among potential homebuyers.

Government officials and the BOK are closely monitoring household debt levels, which remain elevated despite a slowdown in growth. Total household credit increased by 14.9 trillion won in the July–September period, up 0.8% from the previous quarter, though at a slower pace compared to the second quarter according to Bloomberg. Mortgage lending accounted for the bulk of the increase, rising by 11.6 trillion won.

Housing Market Resilience and Policy Dilemmas

The BOK has paused rate cuts for three consecutive meetings amid concerns that cheaper borrowing could reignite mortgage lending and further fuel property price increases. Governor Rhee Chang Yong has said that Seoul's property prices are "way above" expectations and that monetary policy alone cannot rein in the overheated market according to Bloomberg. Rhee emphasized the need for supply-side policies to address long-term imbalances.

President Lee Jae Myung's administration has introduced a series of cooling measures, including a 1.5 billion won mortgage threshold and a land transaction permit system. Despite these measures, demand for mid- to low-priced units in outer districts such as Nowon, Dobong, and Gangbuk remains strong. Permit filings have surged in these areas, indicating continued buyer activity according to the JoongAng Daily. A newly married couple in their 30s even borrowed up to the allowable limit to secure a home in Gangseo District.

Market Dynamics and Investment Incentives

The real estate market is showing a divergence in trends, with Han River belt districts like Mapo and Seongdong cooling down due to price fatigue and loan restrictions. By contrast, northern and outer districts are experiencing a surge in demand, driven by fears of missing out on potential price gains according to the JoongAng Daily. Experts say the current environment reflects a mix of speculative and genuine demand, particularly in areas still below 2021 price peaks.

In the broader economic landscape, South Korea is seeking to attract long-term stock investors and stabilize foreign exchange markets. Finance Minister Koo Yun Cheol announced plans to introduce incentive measures for small investors who hold shares for extended periods. Koo also emphasized efforts to coordinate with major exporters and the National Pension Service to address exchange rate volatility according to Bloomberg.

The government is also preparing for the nation's inclusion in the World Bond Index, expected to bring in capital inflows and bolster financial stability. Koo said the government stands ready to take action if needed to stabilize the won and bond markets, adding that the anticipated capital flows will help offset uncertainties from U.S. tariff policies according to Bloomberg.

Strategic Moves and Geopolitical Considerations

South Korea is also expanding its defense and international trade ambitions. The country is in talks for a $15 billion arms deal with the UAE as part of its Middle East strategy. Hanwha, a leading defense manufacturer, has become a key player in the global arms market, with its weapons systems in demand in the Middle East and Ukraine according to Bloomberg. The defense industry's growth is supported by the country's reputation for speed and reliability.

On the geopolitical front, South Korea has proposed military talks with North Korea to clarify the Military Demarcation Line and reduce the risk of clashes near the border. The proposal comes amid rising tensions and calls for improved inter-Korea communication to prevent miscalculations according to Yonhap News.

South Korea's economy has shown resilience despite external challenges, with the Korea Development Institute forecasting 1.8% growth in 2026. Strong semiconductor demand and a rebound in domestic consumption are providing tailwinds, while construction sector recovery adds to the positive outlook according to Bloomberg.